AMD Rises as Mubadala Investment Eases Liquidity Concerns

Mubadala Development Co. became the largest shareholder of AMD in a transaction announced in 2008 under which the investment company bought the chipmakers’ manufacturing facilities to create a made-to-order semiconductor producer called Globalfoundries. Photographer: Ashley Pon/Bloomberg

Dec. 3 (Bloomberg) -- Advanced Micro Devices Inc., the
second-largest maker of personal-computer processors, rose to
the highest level in six weeks as some investors bet that its
largest shareholder could help avert a cash shortfall.

The stock advanced 7.3 percent to $2.36 at the close in New
York, the highest since Oct. 18. Shares of the Sunnyvale,
California-based company have lost 56 percent this year.

Mubadala Development Co. extended its stake in AMD to about
19 percent including warrants and took an extra board seat last
month, making it more likely that the investment arm of the
government of Abu Dhabi would bail out the company if cash
reserves dipped too low, said Cody Acree, an analyst at Williams
Financial Group.

“If you have a lender of last resort like that, what’s the
potential of you not having options?” Acree said in an
interview.

Mubadala became the largest shareholder of AMD in a
transaction announced in 2008 under which the investment company
bought the chipmakers’ manufacturing facilities to create a
made-to-order semiconductor producer called Globalfoundries. AMD
is one of that company’s largest customers.

AMD’s share gains have been exaggerated as some investors
were forced to buy the shares to cover short positions, said
Acree. That and the recent stock slump has made the shares
volatile, said Ambrish Srivastava, an analyst at BMO Capital
Markets.

‘Tough Road’

“When stocks get to those levels it doesn’t take that much
to show you those moves,” he said. “Fundamentally, they have a
tough road ahead. They still have to win credibility back.”

In October, AMD gave a forecast for fourth-quarter sales
that fell short of analysts’ estimates and said it will cut 15
percent of its staff, citing weak demand across all product
lines in a challenging economic environment.

The revenue projection put the company on course for its
fourth consecutive quarterly sales decline. That led analysts
such as Sanford C. Bernstein & Co.’s Stacy Rasgon to predict
that, if the trend continues, cash reserves may fall short of
what AMD says it requires.

Separately, AMD last week said it is in talks to sell its
campus in Austin, Texas, to boost cash reserves.

The company seeks to raise $150 million to $200 million in
a transaction that may close in the first quarter, said Drew
Prairie, a spokesman. Once the chipmaker sells the site, which
houses corporate offices, it will lease the space back over
multiple years.

Mubadala currently holds about a 15 percent stake in AMD,
with unexercised warrants for additional stock purchases
bringing its total holdings to about 19 percent, Prairie said.